A Slow Walk up Wall Street for Blacks

June 18, 2002

Few Americans know that black slaves helped build the wall after which Wall Street -- the narrow thoroughfare that cuts through New York's financial district -- is named, says author Gregory Bell in his book, In the Black: A History of African Americans on Wall Street (John Wiley & Sons, 2002). The log wall that the Dutch had raised in the mid-17th century to fend of the British is long gone. But history confirms the early involvement of blacks in shaping Wall Street, Bell says.

However, only recently have a number of blacks gained entry into the clubby world of Wall Street firms. Some have even risen to the top. As CEO, Ken Chenault has been running financial-services powerhouse American Express since April, 2001, and E. Stanley O'Neal is poised to take the helm of Merrill Lynch, the No. 1 U.S. brokerage, in 2004. Earlier this year, Richard Parsons became CEO of AOL Time Warner, the Internet and media behemoth that's one of the nation's most closely watched corporations.

Still, the Street has few black players, says Bell, whose father, Travers Bell Jr., founded the brokerage firm Daniels & Bell, which in 1971 became the first black-run company to buy a seat on the New York Stock Exchange. Today, securities transactions by black-owned firms still represent less than 1% of Wall Street's business, Bell writes.

The 24-year-old New York native, who has a degree in history from Oberlin College, believes Wall Street could be in his own future, especially if he decides to go to business school. For the time being, he's mulling over new book ideas involving blacks in politics or business. BusinessWeek Online reporter Billy Cheng recently chatted with Bell via e-mail about the strides blacks have made on Wall Street, as well as the obstacles they still face. Edited excerpts follow:

Q: Your book points out that no African-American company was ever a member of the NYSE until 1971, when Daniels & Bell -- the firm founded by your father -- joined. Why did it take so long for a minority-run firm to become a NYSE member?

A: It is sad that it took so long for African Americans to be a part of Wall Street in general. Traditionally, progress in the industry lagged behind strides made in other professions. Back then, without the tools like the Internet or financial networks to bring it to the masses, Wall Street was a rich man's game, an esoteric industry.

African Americans in general lacked exposure to the business. And even if they were fortunate enough to have the knowledge, few had the money to invest. The result was a severe lack of participation in the industry. In 1966, The New York Times reported that there were only 12 black stockbrokers at NYSE member firms. Just 12. There are more people on a baseball team.

So, it was rare to find an African American who had the knowledge and experience to know what to do with a seat on the NYSE. And it was even rarer to find an African American with that knowledge who had the capital to buy a seat, which before the 1970s recession was a few hundred-thousand dollars. Lack of access to capital has been an historic problem for black businesspeople and still is today.

For [Daniels & Bell co-founder] Willie Daniels and my father, it took about a year and a half of persistence to secure financing. Luckily, they were able to persuade people like Dan Lufkin, co-founder of DLJ [Donaldson, Lufkin & Jenrette], to help with their cause. And as a result, they made history. Sadly, there were a number of talented, ambitious people who were not as fortunate.

Q: How have things changed today, if at all? And what do you think contributed to that change?

A: There are two answers to this question, depending on one's perspective. Compared to decades ago, so much progress has been made. Merrill Lynch, the biggest brokerage, hired its first three black brokers around 1965. They were the only three African Americans out of about 2,500 account executives.

Now, Stan O'Neal is designated to become CEO of a major Wall Street firm. Thirty-five years ago, that was not a reasonable goal for an African American on Wall Street or at any firm. The success of people like O'Neal and Ken Chenault fills me with hope.

At the same time, there's a long way to go. Securities transactions by all black-owned firms account for less than 1% of all transactions on Wall Street. I just heard of a study that reported that about 0.1% of the top 200 Fortune 500 companies' pension funds went to minority-owned firms. Diversity within the upper ranks of major firms is still woefully low.

Q: What led to the end of Daniels & Bell?

A: Well, Daniels & Bell was considered by most to be the pioneering black investment bank, particularly in helping to open up the municipal bond market. A lot of that credit, if not all of it, went to my father [Daniels left the firm early on, in the mid-1970s].

However, the problem with having a company identified with one person is that clients tend to depend solely on that one person. So when he suddenly passed in 1988, at the age of 46, the firm was left with a few question marks. One, he didn't have a succession plan in place for a business without him. Two, clients began calling up and saying, "We didn't hire the firm of Daniels & Bell. We hired Travers Bell."

Within a few months, articles began surfacing about the firm, and how it was losing its hold on core businesses like municipal finance. And the burden was sort of thrown on my family, who inherited the company to develop new businesses. As a smaller company, there is less room for error. And a few bad business decisions led to the firm closing its doors in 1994.

Q: Gary Johnston, founder of online magazine BlackMenInAmerica.com, says with a level playing field, black men excel. Do you think that the playing field can ever be fully leveled?

A: The idealist in me, the part of my mind that is full of hope and optimism for a better tomorrow and a brighter future, believes that a level playing field can be achieved. I think that every businessperson has to have some hope of equality, and that one will be equally rewarded for work.

At the same time, one of the lessons I have learned with my research is how much the present and future are fueled by the past. And sadly, the history of America is of a land that failed to achieve the ideals it has preached. And we are still dealing with the problems caused by the past. As the famous analogy goes, one can't take the chains off a person who has been shackled for years, put him on the starting line next to someone who has always been free, and say run, and think that it is a completely fair race.

Q: You mentioned that African Americans were largely distrustful of business in the '60s. How have African-American attitudes towards Big Business changed, if at all?

A: I think that without question, there was distrust of Big Business, or in this case Wall Street. Wall Street paid little attention in those days to black businesses, black investors, or the talented African Americans who would have done well if given the chance.

I think that has changed a great deal. The industry has improved its attitude toward social issues, in that Wall Streeters of today are much more accepting of social differences than their grandfathers and great-grandfathers were.

One thing that my generation has benefited from is the exposure to successful, ambitious black businesspeople. As an African American, my generation has legacies to draw from, to be inspired by, that were not as available decades ago. There is greater exposure to Big Business, and I think that many African Americans have realized that we need to go beyond [owning] the mom-and-pop shops and take our fair share of the economic pie.

Q: In the past, would African Americans trying to get into Wall Street, in essence, be burning the candle on both ends? Would they face criticism and rejection both from Wall Street and their community?

A: There was some resentment in the early stages of this history. When a now-defunct firm called F.L. Solomon was convinced by an ambitious black broker to open a branch in Harlem in 1950, it closed three months later, and one of the reasons given was that the community did not trust the "Jim Crow" office. But I think the resentment came as a result of Wall Street being a foreign business.

Today, I think that such resentment is hardly there. I don't think any community looks down on an African American for simply for choosing to work on Wall Street. I think they only look down on successful African Americans if they have made it on Wall Street but fail to use that knowledge and other power to give back to the community. So I think that today, it is not the act of going to Wall Street that people examine, but rather what one does after achieving success in the business, and if that success is used to help others.

Q: Ken Chenault of American Express has said being black became a type of social tool for him, and that being distinctly visible in the boardroom could be used as an advantage. To what extent do you believe that's true?

A: I believe that is very true. Anytime a person is a "first" or an "only," they are going to draw significant attention. When my father's firm became the first black-owned member firm of the New York Stock Exchange, it received a lot of attention from the press and peers. That wouldn't have happened if Daniels & Bell was a white-owned firm.

So, being black in a field where the overwhelming majority is not black does make a person very visible. The only thing a person can control is their own performance, and if the spotlight is indeed going to be brighter, one must accept it and leverage it for some good. So if they perform well, their contributions will be very visible. And as is obvious by his career, Chenault delivers.

Q: What do you see as the primary factor that excludes African Americans from full participation in the economy? What are the signs that things are changing for the better?

A: Well, the primary factor is race. Decades ago, the obstacles were formed for the most part by racism. Now, it is not always racism, but often simple social differences.

In major firms, a lot of promotions are decided by who you know, and who your mentor is. Who you know often depends on commonality [i.e., what college your father went to, what golf clubs you are part of, etc.], and, traditionally, African Americans were locked out of such clubs and networks.

For black businesses, a lack of access to capital has been a problem, and historically Wall Street has overlooked investing opportunities in black communities. As Wall Street has become more international in the last decade or so, I have often felt that it was overlooking opportunities in America itself, specifically in black businesses, which often provide great returns because they are undervalued by the market. Black people's money is green, too.

Q: If you look ahead 25 years, where do you think the African-American community will be vis-à-vis the economy?

A: I look at the future as an era full of opportunity and prosperity for African Americans. I am not saying that the challenges of today will suddenly disappear, but history has shown that our progress in American business is inevitable.

Former State Treasurer of Connecticut Frank Borges once said to me that "talent is equally distributed, opportunity is not." As opportunities increase, so will the success of black businesses and African Americans in Corporate America. I can't wait for the day when an African American is named CEO of a Fortune 500 company and race isn't mentioned in any of the articles. It would no longer be the exception, because it would be happening so frequently.